AMD: 'At heart, we're a design company'
Look, Ma! No foundry!
Calling AMD a chipmaker is no longer accurate. The proper term is chip designer and seller.
Today was Advanced Micro Devices first day of business without its chip foundry. In the short term, little will change between AMD, the chip designer, and the Foundry Company, the chip fabrication outfit the company has spun out. But over the long haul, plenty of things can change as AMD is now free to react to market conditions and the Foundry Co. will be looking for new clients to keep its production lines ramping.
Nigel Dessau, chief marketing officer at AMD, says the relationship between AMD and the Foundry Co. is by necessity a symbiotic one, with AMD having a 34.2 per cent stake in the foundry and an equal number of voting shares as the foundry's buyer, Advanced Technology Investment Company.
ATIC is the investing arm of the government of Abu Dhabi, one of the United Arab Emirates that is flush with oil and cash - just the kind of partner you want in a chip fab. It takes billions of dollars to invest in chip manufacturing technologies and move processes forward. Moreover, Middle Eastern governments know that sooner or later, the oil runs out and they are going to need to participate in (and perhaps control) other industries. Buying AMD's fab operations makes at least as much sense as anything else Abu Dhabi might do to bootstrap a tech industry.
"AMD is at its heart a design company, not a foundry," says Dessau, who only joined AMD in March 2008 after a stint at Sun Microsystems running its storage marketing and two decades at IBM working mostly on mainframe marketing.
"It's a great business, but not for AMD. This may be a 300 million unit semiconductor market this year," Dessau concedes, talking about the global market for chips of all kinds, "but it can be a 400 million, 450 million, or even 500 million unit market five years out from now. There is no doubt in anybody's mind that the appetite for semiconductors is going to continue."
Which is why the backers of the Foundry Company, which will launch formally later this week - hopefully with a better name - would kick $825m into AMD's coffers. AMD needed the cash, to be sure. But who really needs a foundry more than a chip maker whose products are tightly tied to the next one or two generations of process technologies in their own foundries? Foundry Co. has a guaranteed customer for quite a few years.
AMD got its start back in 1969, when a bunch of ex-Fairchild Semiconductor executives formed the company and tapped Jerry Sanders to be its president (and eventually its CEO). And in 1975, the company cloned Intel's 8080 microprocessor. (Gordon Moore and Bob Noyce left Fairchild only ten months earlier than the AMD crowd to form Intel, and they have been locked in mortal combat since that time).
Back in the early days of the microprocessor (which was invented by Intel when it created the 4004 chip in 1971), being in the microprocessor business tended to mean being in the foundry business. This was not necessarily so, but it was the way Intel did it, and it is the way IBM did it with mainframes and even earlier electro-mechanical data processing equipment.
But over time as each new generation of chip making technology became more expensive, some microprocessor companies (like Sun Microsystems) decided to be fabless because of the high cost of making chips. Texas Instruments was always happy to have someone like Sun to test out its most advanced tech on large, low-volume chips. (TI has since itself decided to go fabless). Still other microprocessor makers partnered to either keep their fabs full of extra work to make them pay their way better (think IBM) or to actually get chips made by others (IBM made the last few generations of PA-RISC chips for Hewlett-Packard and still makes Unisys' mainframe engines).
Next page: 'Real men don't need fabs'
COMMENTS
Big oil building our chips?
Hi, does this mean maybe someday OPEC will become CPEC and control the price of AMD cpus????
re: Look, Ma! No foundry!
lol.. funniest one i've seen in a long time, thanks alot
Re The 4004 processor
Shane,
That tale sounds very much like a version of selling worthless glass beads and mirrors to the Injuns for their priceless treasures.
Dead end
Dessau: "the speed of the processor no longer determines the experience of the end user"
This guy is delusional. Just because it costs more than ever to develop a new manufacturing process that makes chips faster does not mean users do not want faster processors. I, for one, want a CPU that is 10 times faster. I do not want 10 slow CPUs on one die as a substitute.
Previously, part of the profit generated by selling older generation chips went to subsidise the development of faster, newer generation of semiconductors. It may seem sub-optimal to a marketing person like Dessau, obviously he wants to concentrate on profit generation, not development, but let us see where this fab-lessness leads.
The costly process development is outsourced to The Foundry. Why would The Foundry want to spend billions upon billions of $ to create a process comparable to the latest Intel or IBM process? It is not where the profit lies. The most profitable are one-generation-older chips, I think. So a design company like AMD would not be able to make a CPU faster than Intel's, unless AMD pays same billions to The Foundry for development. If it does not, it would have to design chips using old technology. This would mean an end of AMD as a competitor to Intel on the "fastest CPU" market. We'll be stuck with Intel's monopoly.
'At heart we're a design company'
I'm sure that explains why their recent historic designs have been poor, and the current ones are merely lacklustre. They had an advantage over Intel and recklessly squandered it.
Even when their designs have theoretically been better (supposedly technically superior cache on multicore CPUs for instance), the actual implementation of Intel's shared intelligent cache produced higher performance which is basically all that matters. AMD's failure to catch up is also enabling Intel to fix some of their historic design issues such as adding an integrated memory controller.
All AMD appear to have now is a possible (unproven) advantage in virtualisation (which they have a year to cement before Intel fixes that, and in the meantime VT-d on high end Intel platforms is probably a more enviable feature anyway) and improved power management.
They're staying in the game, but not making any significant progress. Still, at least they're pushing Intel to produce decent chips.
